Foreign investment pledges up 6.5% Q3

Investment pledges from foreign investors rose for the second straight quarter, registering growth of 6.5 percent year-on-year to P45.9 billion in the quarter ending September, the government reported yesterday.

In a report, the Philippine Statistics Authority (PSA) said total foreign investments approved by seven investment promotion agencies (IPAs) from July to September grew from P43 billion a year ago.

The seven IPAs in the report were the Authority of the Freeport Area of Bataan, the Board of Investments (BOI), BOI-Autonomous Region in Muslim Mindanao, Cagayan Economic Zone Authority, Clark Development Corp., Philippine Economic Zone Authority (Peza) and Subic Bay Metropolitan Authority.

IPAs grant fiscal and nonfiscal incentives to investors, which the Duterte administration wanted to rationalize under the proposed second tax package, or the Tax Reform for Attracting Better and High-quality Opportunities (Trabaho) Act.

The Trabaho bill also seeks to slash the corporate income tax rate from 30 percent at present, the highest in the Association of Southeast Asian Nations, to about 20 percent.

When these investment pledges materialize after some time, they are counted as foreign direct investments, or FDIs.

Following year-on-year increases in foreign investment commitments during the second and third quarters, the end-September haul reached P91 billion, up 8.2 percent from P84.1 billion in the first nine months of last year.

The PSA said the top three sources of foreign commitments in the third quarter were British Virgin Islands (P15.5 billion), Malaysia (P10.7 billion) and the United States (P4.5 billion).

Meanwhile, the top three sectors that would receive these approved investments were the following: electricity, gas, steam and air conditioning supply (P16.1 billion); real estate (P11.8 billion); and manufacturing (P7.6 billion).

The bulk of these pledges was expected to materialize in the following regions: Northern Mindanao (P15.5 billion), Central Luzon (P13.5 billion) and National Capital Region (P8.3 billion).

However, when foreign investment approvals were combined with those from local investors, the total commitments in the third quarter declined 5.3 percent to P259.7 billion from P274.4 billion a year ago.

From July to September, Filipino firms pledged P213.9 billion worth of projects, accounting for 82.3 percent of all IPA approvals.

The total approvals are expected to create 41,797 jobs, of which 87.6 percent would be generated by foreign-led projects.

PSA data showed that foreign investors’ pledges declined year-on-year during six of the first nine quarters of the Duterte administration.

In a speech on Thursday, Finance Secretary Carlos Dominguez III said that “with improvements in the ease of doing business, investments are flowing into the Philippine economy.”

“The FDI inflows reached a record high of 10 billion US dollars last year, double the FDI inflows in 2015. Meanwhile, net foreign direct investments rose by 31 percent to $7.4 billion in the first eight months of 2018 from $5.7 billion during the same period last year. This reflects stronger investor confidence in the Duterte administration’s decisiveness in pushing ahead with the economic reform agenda. This also dispels the concern that our tax reform is scaring away investors,” Dominguez said.

“While we saw a dramatic 31-percent rise in foreign direct investments in the first eight months of this year, the Peza continues to claim that investments registered with the agencies are down. This can only mean they are trying to attract investments that cannot be viable without unreasonable incentives. These are not the investments we need to become a strong economy. The more meaningful investments are being made by competitive companies that do not ask for tax holidays and other incentives,” Dominguez added.